What does it take to have a million dollar dividend portfolio? If you are like me you are keeping track of your portfolio’s yield and payouts.

Depending on your age it may be easier than you think to build a $1M portfolio. They key to success with this dream is to be consistent with your budget, contributions, continue growth while paying for your kids college expenses and pick the best income investments.

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Let’s use the dividend calculator to take a quick look at what it will take to build a $1M dividend portfolio over a 20-40 year period.

One of the key points I’d like to stress is that your ability to earn and save is likely to increase as you get older. If you are married and have a spouse that stays at home then the chance to earn and save more will obviously go way up when your spouse returns to work. That is why I’ve chosen to assume higher contributions for older ages.

We will assume a 3% dividend yield and 5% appreciation in stock price in a taxable account that DRIPs.

I’m 25:

Starting principal: $0
If you are wise enough to start at this age you will be at a huge advantage. Just $400 per month for 40 years will turn into over $1.1M by age 65. And just for fun, if you wanted to shoot for a $2M portfolio you’d just need to contribute $400 a month until age 45 and then move up to $2k/month from 45-65. If you are saving $400 a month at age 25 it is pretty reasonable to think you could save and invest $2k/month 20 years later.

I’m 35:

Starting principal: $0
Starting with $0 at age 35 means you’d be a little behind but not yet out of the game. Contributing $800 a month for 30 years would give you a $1M portfolio by age 65. Thinking about $2M? You’d need to do $1600 a month for 30 years or you could do $800 for 10 years and $2650 for next 20 years.

Starting principal: $100k
By many standards a 35 year old with $100k is way ahead. Contributing just $100 per month for the next 30 years will turn that $100k into $1M. Yep, that is the power of having money early in life. To turn that $100k into $2M by age 65 you’d contribute $900/month for the next 30 years.

I’m 45:

Starting principal: $0
If you are 45 without having saved a dime towards your retirement portfolio then it is definitely time to get started doing whatever you can. Unfortunately the later you start the harder it gets because time is the biggest advantage to this formula. It will take contributing $2,000/month for 20 years to reach $1M by age 65.

Starting principal: $100k
Last but not least, this is probably the bucket that many of our readers find themselves in. Having as much as $100k is a big deal. Contributing nothing for 20 years will turn that $100k into $431k. But it will take contributing $1100 a month to reach $1M by age 65.

If nothing else I hope this is an eye opening demonstration of the power of dividend investing and/or compounding interest for retirement planning.

Do you have your own scenario? Of course you do. Head over to the free dividend calculator to enter your own numbers and check to see what it will take for you to reach $1M.

Is $1 Million Enough?

This is not as easy to answer as it seems. For someone that lives a frugal lifestyle and plans to retire in the next 5-10 years this could very well be enough. Using the 4% strategy would give us $40,000 of income per year. Post retirement inflation is accounted for with the 4% strategy. By withdrawing only 4% per year the portfolio will continue to grow. In fact 10 years later the portfolio will be worth $1.5 million and provide $60,000 in annual income.

But what about someone that will retire in 20 years. If you assume 2% inflation that same $1M has a present value of just $700,000. That just simply means $1M today is worth a lot less 20 years from now. We will talk about this more in another post but just remember that when you are figuring our “your number” it is important to think about what today’s dollar’s will be worth when you retire.

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10 Responses to Become A Millionaire Investing In Dividend Stocks

  1. Nice article Ladders. It really shows the importance of investing early. You touched on my biggest fear in retirement investing……INFLATION. One of the reasons I invest in dividend paying stocks is because their dividend raises often outpace inflation. That way, even when I wasn’t getting raises at work, my income was still going up.
    -Bryan

    • Dividend Ladder says:

      There aren’t many things I like more than seeing companies I own boost their dividend payouts by 5-10% per year. I don’t know about you but I don’t see raises like that very often.

  2. Nice calculator. Looks like if I can do $500 a month I can get close to $2 million by 65! Sounds reasonable and shows the huge power of compounding when you start young.

  3. Nice article. You can’t ignore the power of starting early and saving often.

    We’re doing OK, but lots can change. Any 30-something with over $100k invested is doing well in my book and if they keep saving regularly, they are well on their way to becoming a millionaire by age 60 at time of a decent retirement age if they just let their money make money which can make more money.

    Mark

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  4. mike miller says:

    I will be 55 in may of 2014 and am just now starting to invest.,yes I know I am a fool for waiting so long to start. so stop busting my chops and help me to invest in dividend paying stocks,PLEASE!!!

    • Dividend Ladder says:

      Better late than never. If you are just now starting out then working until you are 70 should be something to consider. That could allow you to wait until 70 to start taking social security which would max out your monthly distributions. It will also give you extra time to let your investments grow.

      If you have any specific questions feel free to contact me using the contact page.

    • Hey Mike, as the saying goes “the best time to start was yesterday, the second best time is right now!”

      Good that you are taking control of your future and starting to invest now. I think you are on the right track choosing dividend stocks as your investment choice. Good luck!

  5. This makes me wish I got started earlier. Great stuff.

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